There are many reasons why you may be considering the option to refinance your home mortgage. Refinancing is often done to take advantage of lower interest rates, to pull equity out of a house for home improvement or a major purchase and more. By learning how to refinance your mortgage today, you can take the first step toward refinancing your mortgage.
Who to Work With
One of the first steps that you will need to take is to decide whether to work with a mortgage broker or to apply for a loan directly with a bank. You can avoid paying a mortgage broker’s fees if you apply with a bank directly. However, a mortgage broker will shop around and help you to find the best mortgage possible. This can ultimately save you money in the long run. Furthermore, a broker will walk you through the entire loan process.
The Right Loan
The next step to take is to explore the options available and decide with mortgage you should apply for. You can choose between fixed mortgage rates and adjustable rates, and you can also select from a variety of term lengths. Consider how the different mortgage options will affect your monthly budget and how the term length will affect your goals for the future. For example, if you plan to retire in 15 years, choosing a 20 year mortgage may not be ideal.
The Application Process
After you have decided which mortgage you want to apply for, you must next apply for the mortgage. Your bank representative or broker will assist with this process. Typically, you will be required to complete a loan application, and you may be asked to provide other documentation such as bank statements, tax returns, copies of your paystubs and more. During this time, you may also be asked to order an appraisal and other property inspections if required, or your lender or broker will order them for you.
The Closing Process
Refinancing a mortgage is often less stressful than obtaining a mortgage for a real estate purchase. After you have provided your broker or bank with the required documentation for the loan, you usually only have to wait a few weeks for the lender to underwrite your loan request. You will be notified when your loan request has been approved. The closing will typically be similar to the closing of your original mortgage, and it will take place in a title company’s office or through a title company. The title company will handle using the new loan funds to pay off your existing mortgage and will ensure that the existing mortgage lien has been removed from the property’s title. If you are obtaining cash out from your refinance, you will receive the funds through the title company at closing.
Refinancing your existing mortgage, whether into fixed mortgage rates or adjustable rates, may seem complicated at first glance. However, when you understand the loan process, choose the right mortgage to apply for and work with a mortgage broker or lender that will guide you through the loan process, the process is straightforward and easy.